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CHAPTER SIX

Encouraging Action by Group Purchasers

Group purchasers are a prominent feature of the U.S., employment-based
health care marketplace. These entities - private employers, union-sponsored
multiemployer plans(1), and Federal, State and local governments - enter into
agreements with health plans or provider groups to provide health care to their
individual members. As intermediaries between their members and the health
plans, group purchasers make decisions on behalf of their employees or
beneficiaries, such as: (1) what health benefits to purchase; (2) what portion
of the care is to be paid by the employee/ beneficiary; and (3) the number and
types of health plans with which to enter into agreements. To the extent that
group purchasers make these decisions with attention to quality as well as cost
(value), they can be a considerable force for quality improvement.

RECOMMENDATIONS

Group purchasers, to the extent feasible, should provide their
individual members with a choice of plans. Where group purchasers are not
able to offer a choice of health plans, they should provide for adequate input
from employees in the development of the criteria and selection of the health
plan to be offered.

State and Federal governments should create further opportunities for
small employers to participate in larger purchasing pools that, to the extent
feasible, make a commitment to individual choice of plans. State and
Federal policy makers should take action to foster the creation of more group
purchasing coalitions for small purchasers by examining insurance rating rules
and Federal tax policies that serve as disincentives to the formation of
coalitions. State and Federal governments, foundations, and others should
explore the option of providing "seed money" to groups of small
purchasers to foster the creation of larger, non-profit consumer-choice
purchasing coalitions. State and Federal governments also should explore opening
public employee health benefit programs to participation by small group
purchasers. Opening public employee programs should be carefully studied and
analyzed, including the results of previous such efforts, prior to
implementation to assess feasibility, cost implications, risk selection issues,
and unintended consequences.

All public and private group purchasers should use quality as a factor
in selecting the plans they will offer to their individual members, employees,
or beneficiaries. Significant strides have been made by leading group
purchasers in the pursuit of value-based purchasing, but further efforts should
be made to encourage widespread adoption of best practices throughout the
industry. It is critically important that information on quality and cost be
considered and acted upon when making purchasing decisions. Group purchasers
should share with their individual members/ beneficiaries/ employees the
information on quality, cost and other factors that led to their decision to
offer certain health plans. Consideration should be given to providing the
Medicare program with greater flexibility to selectively contract on the basis
of qualityafter full exploration of implications for quality of care
and unintended consequences.

Group purchasers should implement strategies to stimulate ongoing
improvements in health care quality. Large purchasers, in particular, will
need to continue to exercise leadership by undertaking such initiatives, which
often are resource intensive, but lead to improvements in quality for all
recipients of health care. Such approaches include: using financial
incentives to encourage exemplary performance; undertaking collaborative
activities with their contractors; and participation in local, state or national
health care quality improvement efforts.

GROUP PURCHASERS

Most individuals in the U.S. who have health insurance secure it through
group purchasers. In 1995, more than 83 percent of the insured population was
covered by private insurance, mostly employment-based programs, while about 31%
were enrolled in public insurance programs (i.e., Medicare, Medicaid and
CHAMPUS/CHAMPVA). As shown in Table 1, private group purchasers accounted for
more than $206 billion in health care expenditures, the Federal government
nearly $240 billion, and State and local governments more than $241 billion.
Although the combined power of these group purchasers in the marketplace could
be a strong force for quality improvement in the health care industry, some
group purchasers face impediments in fulfilling this role.

IMPEDIMENTS TO VALUE-BASED PURCHASING

"Value-based purchasing," purchasing based on both price and
quality considerations, is widely regarded as the standard for health care
purchasing strategies (The Business Roundtable 1997; Meyer, Rybowski and
Eichler, 1997; and Schauffler and Rodriguez, 1996). However, some group
purchasers confront obstacles to fully exercising this purchasing strategy.
These include small private purchasers, Medicare, and State Medicaid agencies.

Small Purchasers

The likelihood that health coverage is purchased by a group purchaser is
directly related to the size of the group to be insured. In surveys of small
employers (fewer than 50 workers), 51 to 58 percent of businesses offer health
insurance to their workers (Cantor 1995, Morrisey 1994), in contrast to large
employers, of which 91 to 96 percent were estimated to offer insurance (Cantor
1995). Small purchasers have difficulty providing anyinsurance, let
alone purchasing it with attention to quality.

Employer contributions to the Medicare Hospital Insurance Trust Fund, are
not funds that employers use to purchase health care and therefore are not
included in the estimates of employer purchasing costs. Similarly, the Federal
share of Medicaid has been assigned to States, since it is States that purchase
Medicaid services. Multi- employer, union-sponsored plans are included in the
category "private employers," and are estimated to account for about
five percent of the workers who hold health insurance through their employment
(National Medical Expenditure Survey, 1987).

* NA: Employee data are not available separately for private industry and
State and local governments.

** Includes maternal and child health, vocational rehabilitation, Substance
Abuse and Mental Health Services Administration, Indian Health Service, Federal
Workers Compensation, and other miscellaneous general hospital and medical
programs, public health activities, Department of Defense and Department of
Veterans Affairs.

Although small employers account for about 20 percent of the workforce, they
account for nearly 90 percent of the more than 5.2 million firms in the U.S. (US
Census Bureau 1997). The difficulties faced by small employers in purchasing
insurance, discussed below, are also factors that will inhibit small purchasers'
ability to use their purchasing dollars to improve quality.

Insurance costs per covered life are higher for small purchasers than large
groups because many health plans and providers offer price discounts in return
for volume and fixed costs for administration must be spread over a smaller
number of participants. In a 1995 survey of small businesses employing fewer
than 50 workers, "premiums too high" was the number one reason given
by small employers for not providing health insurance (Jensen, 1997).

Many small purchasers choose to offer only one plan to minimize
administrative costs. In addition, a growing number of purchasers (large and
small) and health plans find they can better protect themselves from adverse
selection through exclusive contracts (Gabel, 1997).

Large purchasers typically have personnel and/or benefit consultants to
study alternative health plans and invest time in the health plan selection
process. Sixty percent of small businesses surveyed in 1995 cited "administrative
hassle" as an important reason why they do not offer health coverage as a
benefit (Jensen, 1997).

Small purchasers also lack the purchasing power to obtain comparative
information about health care quality. Even though quality report cards are
increasing in their availability from State governments, purchasing coalitions,
and other entities, these are not yet widely available. Small purchasers, unlike
larger purchasers cannot afford to pay the sometimes high costs of obtaining
this information from private sources, and have limited leverage to use in
requiring reluctant health plans or provider organizations to submit audited
quality data in desired formats to facilitate use.

Medicare

While Medicare is a large purchaser of health care, it faces several
obstacles that prevent it from fully flexing its muscle to achieve improvements
in health care. Although health plans contracting under the Medicare program
currently are monitored with respect to quality of care in a variety of ways
(e.g., through collection of quality data, consumer satisfaction surveys, and
additional requirements for health plan quality improvement activities), HCFA
cannot selectively contract with consistently higher performing health plans in
a given market, but rather must contract with all plans that meet national
standards. Selectively contracting within a geographic area with fewer rather
than a greater number of health plans offers numerous administrative and
quality-related advantages: administrative simplicity, developing long term
partnerships, obtaining a better price, providing health plans with a sufficient
number of enrollees to justify their development of specialized services, and
providing a sufficient number of enrollees to support statistically significant
studies of quality of care. These facts are recognized by group purchasers in
the private sector, and explain why group purchasers selectively contract with
only a few health plans in their marketplace.

Medicare's fee-for-service program lacks some of the accountability
mechanisms found in the health plan contracting program to more effectively
improve health care quality (e.g., individual providers do not assume
responsibility for defined populations). Most beneficiaries receive health
care services under (and approximately 90% of the total 1995 Medicare budget was
used to purchase) fee-for-service as opposed to managed care (Cowan, 1997).

State Medicaid Agencies

Even though State Medicaid programs are large purchasers of health coverage
for families and children, the disabled and elderly, they too face constraints
that limit their ability to fully flex their purchaser muscle. The bulk of the
Medicaid program's purchasing dollars is directed to purchasing long term care
for disabled and elderly in the fee-for-service marketplace. As noted for the
Medicare program, fee-for-service arrangements face greater difficulties in
measuring and improving health care quality.

State Medicaid agencies have been under intense budget pressures and
increased management demands in recent years. This has limited the availability
of Medicaid personnel to implement purchasing strategies based on quality
considerations and to strongly advocate on behalf of Medicaid beneficiaries. In
addition, many State Medicaid agencies maintain dual managed care and
fee-for-service programs. Because State Medicaid agencies have had to maintain
the level of effort to administer a fee-for-service program, they have not been
able to divert as many resources to quality-based purchasing of managed care
plans.

In summary, when discussing how group purchasers can act to promote,
protect, and improve health care quality, it is important to recognize that not
all group purchasers may be able to undertake the same set of activities. It
may not be necessary, however, for all purchasers to undertake the same
activities in order to have a marketplace more driven to quality. If a critical
mass of group purchasers demand high quality health care, smaller purchasers
also may benefit from these improvements in care. But, all group purchasers
should be able to undertake some activity or activities to improve health care
quality, regardless of their size and public/private status. Potential
activities include:

offering consumers a choice of health plans.

selecting health plans and products based on considerations of quality and
cost.

providing members with information to support their role as health care
consumers.

OFFERING CONSUMERS CHOICE

As documented in Chapter Seven, individual consumers(2) and their families
constitute the largest single source of money purchasing health care in the
United States. If the marketplace power of this $310 billion to protect and
improve health care quality is to be maximized, the individuals who control the
use of this money will need to be able to exercise their judgement and
preferences as consumers and choose among competing providers, products, and
health plans.

Providers are those institutions and individuals that directly
provide "hands-on" health care (e.g., physicians, hospitals, home
health agencies and long term care facilities). Mechanisms for providing
consumers with choice of providers were addressed in the Consumer Bill of Rights
and Responsibilities.

Health care products are types of arrangements for delivering a
defined package of health care services. These arrangements (products) include:
indemnity insurance, health maintenance organizations (HMOs), Point of Service
products (POSs), and Preferred Provider Organizations (PPOs). These products
differ according to several key dimensions such as: cost-sharing arrangements,
limitations on network providers, and approaches to quality and utilization
management.

Health plans refer to the organizations (e.g., licensed insurance
companies, managed care organizations, unlicensed Provider Sponsored
Organizations, third party administrators, provider networks or other companies)
that offer the health care products and assume some or all of the financial risk
and / or perform various administrative functions associated with offering a
health insurance product(s).

Historically, "Plans" and "Products" were one and the
same. HMOs only offered HMO products and insurance companies only offered
indemnity products. In recent years many health plans have diversified and now
offer multiple products. For example, HMOs have begun to offer Point of Service
products and indemnity insurers have created their own HMO products.

With respect to consumer choice of health products, an analysis of the 1996
KPMG Survey of Employee Health Benefits found that 56 percent of employees were
offered multiple types of products (called "plan types" in the survey)
(i.e., they were offered a combination of either HMO and conventional products,
PPO and POS products, an HMO and some "other" product, or some other
combination of products). An additional 36% of employees are only offered one
health insurance product, but one which allows employees to receive care from "non-network"
providers (i.e., either a PPO, POS product, or a conventional product). When the
percent of employees who are offered either these multiple combinations of
products or a single product that offers a non-network component are added
together, 92 percent of all workers are found to have a choice to use network or
non-network providers (Barents Group 1996).An analysis of the March 1996 Current
Population Survey by the Employee Benefits Research Institute found that in
1995, 77% of the privately insured population of the United States received
their health care through a health care product that allowed access to
non-network providers (i.e., a PPO, Fee For Service, or POS-HMO product) (EBRI,
1997).

Clearly, through the development and offering of innovative products such as
Point of Service products and preferred provider organizations, the health care
marketplace has done much to facilitate consumer choice of providers. But, it
is important to recognize for some consumers, accessing out-of-network providers
may have significant financial consequences in terms of higher cost-sharing.
Also, using an out-of-plan option as the primary vehicle for creating consumer
choice may conflict with the goal of relying upon health plans to pursue
quality- enhancing initiatives.

Health services research has not yet well- measured the different levels of
health plan choice offered consumers. While research has been conducted that
attempts to measure the extent to which consumers have a choice of "plan,"
often the data obtained actually measures the availability of "products."
For example, while the 1997 KPMG Health Benefits Survey concluded that, "Since
1989, employers have significantly reduced the overall number of plans
from which workers may choose." KPMG also notes that its "data may
overstate the true degree of choice employees have available. If one managed
care organization offers an HMO, conventional and PPO plan to an employer, we
would count this as three offerings" (KPMG 1997). This blending of plan
and product choice is also found in other surveys of consumer choice (Cantor,
Long and Marquis 1995;) making it impossible to assess trends in choice of plan.

However, one can identify the percent of consumers who have no choice of
plans. This is indicated by the percent of consumers who have only one plan
offered to them. Regardless of whether a survey actually measures plans,
products, or both, the availability of only one health insurance coverage option
can reasonably be interpreted as only one plan. The KPMG Peat Marwick Health
Benefits Survey indicates that from 1989 to 1997, the percentage of employers
with 200 or more workers offering only one plan grew from 36 - 44 percent (KPMG
1997). Among mid-size employers, 53 percent offered only one plan in 1996
(Gabel; Ginsburg; and Hunt 1997). Other surveys indicate that about 40 - 50
percent of employees work for an employer who offers only one health plan
(Cantor 1995; Davis and Schoen 1997).

The extent of employee choice often depends upon employer size; 32 percent
of employers nationwide are estimated to offer only one health plan to their
employees, but this varies from about 89 percent of very small firms (one to 24
employees) to about nine percent of very large firms (5,000 or more employees)
(Gabel 1997).

There are many legitimate reasons why a group purchaser may wish to contract
with a single health plan. As discussed above, some employers find that a health
plan or third-party administrator will give them a better price if they sign a
"sole source" contract. Such contracts also tend to protect health
plans and employers from adverse selection (KPMG, 1997) which can result when a
given health plan disproportionately attracts sicker employees. If not
adequately reimbursed for caring for sicker patients, such health plans are
adversely affected (see Chapter 8).

Offering more than one health plan often is accompanied by greater costs to
a group purchaser. For example, the cost of preparing materials for assisting
individual members to select between the plans, administering additional premium
payment systems, and evaluating and providing ongoing incentives for quality
improvement to two contractors, will very likely be higher than the cost of
offering one health plan.

While the leading group purchasers who already offer more than one health
plan may have found this to be a cost they are able to accommodate, many group
purchasers, especially small employer purchasers, may not be able to bear these
additional costs. In addition, leaders in the industrial quality improvement
movement have long urged producers to, "Move to a single supplier for any
one item (Deming, 1995)." If an organization identifies the health care of
its employees as one of its central services, and if employers treat the
purchase of health care as they do their other large service contracts - and
recent evidence suggests that some leading purchasers are doing just that (Wall
Street Journal, 1996) - more employers may reasonably seek to offer fewer health
plans to their employees.

Because of this, and because the marketplace has developed innovative
products that offer consumers greater choice of providers, some may question
whether offering consumers a choice of competing health plans is necessary. It
could be argued that consumers value most their relationship with individual
providers, and may not need or desire a choice of health plans as long as the
product(s) offered allow access to desired providers. It could further be argued
that group purchasers' selection of health plans based on quality will be a
strong enough marketplace stimulus to improve quality and that additional
selection of health plans by consumers offers little additional marketplace
incentives to improve quality. However, when seeking to improve quality through
the use of market forces, there also may be legitimate reasons why consumers may
benefit and quality can be improved if consumers have a choice, whenever
possible, of competing health plans.

The hallmark of a healthy marketplace has been defined by economists as one
that allows consumers to "vote with their dollars" for the products of
competing sellers (Friedman, 1935; Samuelson, 1992). Providing them with a
choice between two competing health plans allows consumers to financially "weigh
in" in the marketplace for health plans and more directly influence how
health plans develop their products and services. Further, because how a health
plan performs in one dimension of quality cannot indicate how it will perform in
others (Brook; McGlynn; Cleary 1996), a given health plan may not address the
needs of all consumers equally well. For example, if one health plan performs
well on preventive care, but another excels on care to the chronically ill,
group purchasers and consumers will need to determine which aspect of quality
they more highly value, and the answer may not always be the same.

Increased consumer responsibility for selecting a plan may also be
appropriate in light of the increased responsibilities consumer have for health
care costs. As described in Chapter Two, employees are increasingly being asked
to share a greater portion of the costs of their health care premiums (GAO,
1997). From 1992-96, employees' dollar contribution to premiums increased at an
average annual rate of 7.2 percent, while premium costs overall increased only
3.8 percent (Ginsburg and Pickreign, 1997). From 1988 to 1996, the portion of
the premium paid by employees for family coverage rose from 26 to 30 percent.
For individual coverage, the employee share rose from 10 to 22 percent (Jensen
et al., 1997).

In addition to assuming increased responsibility for costs, consumers
increasingly are being asked to assume greater responsibility for their health
care decisions. The Consumer Bill of Rights encourages consumers to be
responsible for (among others), "becoming involved in specific health care
decisions, . . . recognizing the reality and limits of the science of medical
care, and . . . the health care provider's obligation to be reasonably efficient
and equitable in providing care to other patients and the community, . . .
becoming knowledgeable about plan coverage and health plan options, including
all covered benefits, limitations and exclusions, rules regarding use of network
providers, coverage and referral rules, appropriate processes to secure
additional information, the process to appeal coverage decisions, and reporting
wrong- doing and fraud to appropriate resources and legal authorities."
The Consumer Bill of Rights and Responsiblities also states: "The right to
information will improve health outcomes only to the extent that consumers have
a choice of health plans and use that information in exercising their choice."

Allowing consumers to exercise choice at the level of the health plan
(especially when health plans provide substantial "value added" (see
below)) is consistent with initiatives to encourage greater responsibility by
consumers.

Providing consumers with a choice of health plans, in addition to choice of
provider, acknowledges that health care quality is not just a function of the
individual and organizational providers that make up a health plan. Health
plans provide "value added." They do this by performing many
activities that can directly affect consumers health care and health care costs,
such as: employing mechanisms to promote evidenced-based health care and
technological advances, constructing disease management protocols to care for
individuals with complex, acute or chronic illnesses; developing patient care
management tools such as patient reminder systems and disease registries; and
developing powerful information systems that allow the health plan to strongly
monitor and improve the health care delivered to their members. Because health
plans bring such "value-added" to health coverage purchased by
consumers, not all health plans are alike, even if their provider networks
greatly overlap. Allowing consumers a choice between two competing health plans
acknowledges these differences and encourages consumers to select based on the
plan features and attributes important to them. In this way consumers can serve
as a stimulant to development of improved quality management practices by health
plans.

These considerations support the position asserted in the Commission's
Interim Report. The Consumer Bill of Rights and Responsibilities states that: "Consumer
choice of health plans is important and should be provided whenever possible and
in a way that is affordable both to employers and consumers."

These considerations, in addition to those compelling reasons why group
purchasers may wish to put some limitation on the amount of choice available,
suggest the need for a balanced approach to consumer choice of plans.
Specifically, while most group purchasers may not find it desirable or feasible
to offer three, four, five or more competing health plans, offering consumers a
choice of two competing health plans can address the need for consumer choice of
plans.

When it is not possible for a group purchaser to offer any choice of health
plans to their individual members, group purchasers can provide group members
with input into plan selection. Group purchasers have numerous options
available to obtain input from employees regarding their preferences for
specific health plans and products, and some employers are already exercising
these options. Ryder System, has undertaken such activities by
involving its employees in the process of selecting the health plans to be
offered (The Business Roundtable 1997). Multiemployer (Taft-Hartley) health
plans have elaborate structures for members' input since federal law requires
that there be equal representation of the covered employees and contributing
employers in the administration of the plan. As a result, representative
employees are directly involved in determining the amount of "choice"
to be provided in consideration of the trade-offs to be made between cost and
choice.

Some employers are maintaining or expanding their ability to offer a choice
of health plans to their individual members by joining a coalition of purchasers
(Hoy 1996; Drury 1997). Joining a coalition of purchasers also has enabled some
small purchasers to: offer insurance where it has been previously unaffordable;
pursue value-based purchasing in the marketplace; and employ mechanisms to
promote accountability by their health plans for health care quality. Consumer
choice purchasing coalitions have been possible only in states that have
achieved a certain degree of insurance reform, including limitations on rate
adjustment based on health status, and modification of "fictitious group"
laws that may have had the unintended consequence of preventing consumer choice
purchasing groups (Curtis and Haugh 1996). These voluntary purchasing
alliances/coalitions/groups face a number of other obstacles, which can impede
their growth. These include such issues as the need to work with local insurance
agents and the additional costs that offering health insurance will incur for
small employers who previously did not offer insurance to their employees
(Curtis 1998). In addition, coalitions also face high development costs
estimated to be in the range of $500,000 to $600,000 for the first year. These
efforts typically are not funded by charitable, grant-making foundations,
because coalitions do not qualify as 501-c-3 organizations. In addition, some
Federal tax policies may unnecessarily impede the formation and growth of some
purchasing coalitions.

In spite of these difficulties, the Employees Benefit Research Group
documents that 17 states have established voluntary health alliances (the
majority located in the private sector) for the purpose of allowing small
groups, acting together, to gain the bargaining power and economies of scale
enjoyed by large groups (EBRI, 1997). While not a panacea, health care
purchasing coalitions can make and have made contributions by assisting some
small group purchasers to offer a choice of competing health plans to their
individual members and potentially achieving the same economies of scale and
ability to undertake value-based purchasing that are more readily available to
larger group purchasers.

SELECTION BASED ON QUALITY AND COST

A variety of approaches can be used by group purchasers to incorporate
quality into their plan selection processes. GTE Corporation uses HEDIS data as
one factor in determining the health plans with which it will contract. Xerox
Corporation ranks health plans based on accreditation status, quality indicators
and satisfaction ratings and provides this information to employees during open
enrollment periods. ARCO evaluates health plans using 50 weighted quality and
access criteria and sets its employer contribution to the premium level of the
highest ranking plan. The Arizona Medicaid program assigns a weight of about 70
percent to quality and access criteria and 30 percent to cost in evaluating
potential health plan contractor proposals, and in 1994 awarded contracts to 14
of 21 bidders (GAO 1997).

Although significant progress has been made, available information on the
practices of group purchasers indicates that some are not yet following the lead
of these and other group purchasers. In a survey of 33 large purchasers in
California, New York, Cleveland and Pennsylvania, who were responsible for more
than 1.8 million lives, 45 percent reported using HEDIS data, 55 percent
reported using accreditation data, and 53 percent reported using consumer
satisfaction survey data to choose a health plan. Only 25 percent reported using
hospital performance measures when they were available to them. Further, only
20 percent of survey respondents had explicit decision criteria and approaches
for using the quality data and consistently integrating and weighing competing
factors (Hibbard; Jewett; Legnini; and Tusler 1997). Results from another 1997
survey of 325 US companies found that although most employers consider provider
network characteristics (e.g., geographic accessibility, credentials,
privileges) along with cost and utilization data, far fewer have considered more
quantifiable measures of quality such as HEDIS data, medical outcomes and
audited report cards. (Washington Business Group on Health and Watson Wyatt
Worldwide).

In an examination of purchasing strategies in 15communities, it was
found that only a small group of large and prominent employers are using quality
data to make health plan selections (Lipson 1966).Another survey
(Lippman 1966) of executives of companies with 20 or more workers found that
when asked to divide 100 points among five decision-making factors in selecting
health plans, replies were: 33 points for lowest rates (prices); 25 points for
wide choice of primary care physicians; 15 points for performance against
standardized quality measures; 14 points for convenient access to specialty
care; and 13 points for accreditation. The 1997 KPMG Health Benefits Survey of
employers with 200 or more workers finds that, "In selecting a health plan,
employers continue to make their decisions on traditional concerns - cost,
customer service, and the physicians in the provider network - rather than
measurable standards of quality or NCQA accreditation. Nearly two-thirds of
midsize and large employers are unfamiliar with NCQA accreditation (KPMG 1997).

The limited practice of purchasing based on quality is attributed to, "The
growing complexity of the provider market, the difficulty in deciphering new
rating and accreditation standards, the burden of annual negotiation of multiple
contracts, the lack of effective and standardized outcome and treatment data,
and wide disparities in local and regional norms for what constitutes value,
quality and accountability."(Washington Business Group on Health and Watson
Wyatt World Wide 1996). Other identified reasons include the lack of awareness
of available information on quality, lack of purchasers' understanding of
quality measures, lack of "packaging" of quality information to meet
purchasers' needs, and lack of decision support tools to aid purchaser
decision-making (Hibbard; Jewett; Legnini; and Tusler 1997).

SHARING INFORMATION WITH CONSUMERS

Like group purchasers, individual members of purchasing groups will need
information on quality to make their own purchasing decisions. Individual
members may reasonably look to their group purchasers to provide them with
information on the quality of health plans available to them. A number of large
group purchasers are responding to this need. To help employees judge which
plan best meets their needs, Digital Equipment Corporation publishes a report
card for their employees. AT&T, together with its unions (the
Communications Workers of America and the International Brotherhood of
Electrical Workers), produces an annual report card which details health plan
service and clinical performance in comparison to industry normative data (The
Business Roundtable 1997).

However, as discussed above, access to and use of such measures by group
purchasers is not yet widespread, consequently it is not surprising that
employers provide little comparative quality data to their employees. In the
Watson Wyatt / Washington Business Group on Health survey, the majority of
employers reported providing employees with information on "how to use a
plan," service locations, cost and benefits comparisons; 10 percent or
fewer provided employees with report cards, HEDIS or medical outcomes data. In
another survey of 33 large employers that purchase for 1.8 million lives, 78
percent of purchasers reported that HEDIS data were available to them, 54
percent reported using it for choosing a plan, and 31 percent provided
performance measures to their employees (Hibbard; Jewett; Legnini; and Tusler
1997).

Although a number of large group purchasers are undertaking consumer
information initiatives, it is probably unrealistic and perhaps undesirable to
expect all group purchasers to assume the primary responsibility for obtaining
comparative quality data from health plans, and analyzing and presenting it to
consumers. As discussed in Chapter Seven, the provision of valid and useful
information to consumers is labor intensive and costly. In addition, a number
of surveys and focus groups have shown that consumers place a very high value on
the credibility of the source of information. In the Kaiser /AHCPR survey, 58%
of those surveyed agreed that "employers were not a good source of
information about the quality of health plans because employers' main concern is
to save money on health benefits" (Robinson and Brodie 1997). The same
conflict between cost-saving and quality also exists in the Medicaid and
Medicare programs.

However, all group purchasers can provide their employees or beneficiaries
with the information on quality, cost and other factors that led to their
decision to offer certain health plans. The information that a consumer will
need to assess quality and make their own purchasing decisions will vary
accordingly. For example, if a consumer felt reasonably assured that the health
plans offered were selected with substantial attention to overall quality, the
consumer could focus attention on other concerns, such as services pertaining to
specific clinical conditions, accessibility of providers, specific practitioners
within the plan, etc.

STIMULATING QUALITY IMPROVEMENT

Subsequent to the decision to select a source of health care coverage for
their individual members, purchasers also can pursue additional steps to
contribute to improvements in quality over time, including: providing financial
incentives to improve performance, undertaking collaborative projects in
partnership with their health plans, and supporting community, state and
national activities to improve quality. The Business Roundtable has documented
numerous such quality improvement initiatives undertaken by leading U.S.
Corporations (The Business Roundtable 1997). Examples of how these and other
purchasers have undertaken such initiatives are:

· AT&T. In concert with the Communications Workers of
America and the International Brotherhood of Electrical Workers, AT&T
produces annual health plan report cards based on measures of service and
clinical quality of care; utilization review performance; results of surveys of
employees, primary care physicians and specialists in POS plans; HEDIS data and
NCQA accreditation, which are used to provide feedback to health plans for
improving quality (The Business Roundtable 1997).

· The Alliance. A private purchasing cooperative in Denver,
Colorado, withholds up to 2 percent of health plan payments and distributes
funds associated with plans not meeting performance standards to the best
performing plans (Institute of Medicine, 1996).

Ford Motor Company. Ford is undertaking a major effort to
communicate its expectations about health care quality to its major health care
suppliers through a "Healthcare Supplier Summit." The conference,
attended by the leadership of virtually all of Ford's healthcare suppliers and
major health care providers (hospitals and physicians), addressed the theme of "optimizing
quality while eliminating inappropriate costs"(Myers, 1998).

Nashville. Three of Nashville's largest employers (Kroger, Co.,
Gaylord Entertainment Co. and Bridgestone/Firestone Inc.) - and the United Food
and Commercial Workers local 1995 are co-sponsoring an initiative to evaluate 14
of the city's hospitals with respect to length of stay, rates of hospital
acquired infection and pulmonary embolism, and the number of Cesarean
deliveries. (Hurley 1996).

In summary, not all group purchasers have the resources to participate in
community-based quality improvement initiatives like the ones mentioned above.
However, nearly all communities have local public health initiatives to improve
health care and health care quality; e.g. childhood immunization campaigns,
cancer screening programs and health education programs, in which group
purchasers, even small group purchasers, could participate even if their
participation is limited to informing their employees about available free
services.

Myers, Woodrow A., Director of Healthcare Management for the Ford Motor
Company. Testimony before the Subcommittee on Roles and Responsibilities of
Group Purchasers and Quality Oversight Organizations of the President's Advisory
Commission on Consumer Protection and Quality in the Health Care Industry.
Washington DC. February 25, 1998.

National Coordinating Committee for Multi-employer Plans, "Multi-employer
Health and Welfare Plans: An Overview of Their Operations, Regulation and
Concerns" Prepared for the Advisory Commission on Consumer Protection and
Quality in the Health Care Industry. September 9&10. 1997

The Business Roundtable, Quality Health Care is Good Business.
Washington DC September 1997.

Wall Street Journal, "Auto Makers Attack High Health-Care Bills With
New Approach - They treat providers like other suppliers, try to help them cut
cost" Monday December 9, 1996

Washington Business Group on Health and Watson Wyatt Worldwide, "Getting
What You Pay For - Purchasing Value in Health Care," Watson Wyatt Worldwide
1997.

(1) Union-sponsored multi-employer plans play an important role in providing
health insurance in industries where workers are highly mobile, such as
construction and building trades. Workers in these industries are often
employed on a temporary basis (e.g., for the life of a particular construction
project) and usually work for many different employers over the course of their
careers.

(2)"Consumer" refers to all potential individual end users of
health care, i.e., men, women and children who receive the health services
delivered by physicians, nurses, dentists, and other licensed and unlicensed
health care workers.

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